NerdWallet: Hiring a Financial Advisor Who Understands Your Situation

When looking for a financial advisor, many people prefer to work with an advisor from their community. This can mean working with an advisor who shares your religious faith, your gender, or your ethnicity.

When can working with a Latino advisor help you achieve your financial goals? Beyond attributes like bilingual communication and his or her understanding of international financial topics, which may be of use to immigrants, many people prioritize working with someone they feel understands their situation.

Unfortunately, a 2009 study from the Financial Industry Regulatory Authority showed just 38 percent of Latinos surveyed had met with a financial advisor in the past five years – a lower rate than any other of the ethnic demographics the survey tracked.

Who Is the Right Advisor For You?

“The really good advisors I know don’t try to be all things to all people,” said Brian Frederick, a Scottsdale, AZ.- based CFP. “They focus on serving the needs of a particular group. I’ve been in the business for 13 years and worked with a diverse client base in terms of age, occupation, net worth, and life stage. What I discovered is that the most fulfilling, productive client relationships are [those on which] I work with clients that are similar to myself. For that reason, I chose to focus my practice on successful Generation X professionals.”

Brian defines that group as made up of people who are mid-way in the career and have already experienced some measure of success, but are still worried about things like paying for a child’s education, how to accumulate enough for retirement in an era of low interest rates and high market volatility, and having enough time to devote to their finances between work and family commitments. For him, defining a community and working with its members is leading to success for his clients.

Understanding the Full Picture

“A financial advisor can’t work effectively with a client unless he or she thoroughly understands a client’s unique financial life situation,” said Michael Philips, a Marina Del Ray, CA.-based planner. He added that he thinks it’s common for financial advisors to work with certain community groups or ethnic group because they often understand the community’s needs better than someone who may not be familiar with their unique needs, attitudes towards money, risk tolerance and desires, among other financial issues.

When Is It Not A Good Idea?

One thing to remember is that, unfortunately, opting to look for a Latino advisor may limit your choices. “One of the black eyes of the financial services industry is that minorities of all types are under-represented as financial advisors,” commented advisor Brian Frederick.

Advisor Keith Watson pointed out that one reason a financial advisor may work exclusively with clients of a certain ethnicity is because they only get new clients through referrals. “The main way financial advisors grow their practice is through referrals,” Watson explained. “So as they grow and know people, it will generally be in the same community.”

But a referral isn’t always the best way to select an advisor — just because they were right for your friend, they may not be right for you. Michael Philips pointed out a well-documented occurrence of people frequently being scammed by unscrupulous advisors from their own community. Advice-seekers should not allow a perceived personal connection to act as a shortcut to fully researching a prospective advisor’s credentials.

Remember that wherever you choose to look for professional financial advice, you want an advisor who understands you – whether you come from the same background or not.

“I do not think it matters what community the advisor is from,” Keith Watson added. “I think all that matters is that the financial advisor understands the situation their client is in. As long as it is clearly stated what needs to be accomplished, then it doesn't really matter where they come from.”